Commenting on the government’s move to hike the minimum support price, he said the move will help sectors related to rural consumption

Mid and smallcap stocks have corrected in double-digits after a straight rally seen in the past 3-4 years. Going forward, Sailesh Bhan, Deputy CIO, Reliance Mutual Fund, feels a bounceback in earnings growth will dictate the trend seen in the broader market.

The midcap sector, which has done very well in the last 3-4 years, is now witnessing some decline. The big carnage was seen in the BSE Smallcap index, which plunged 17 percent, and the BSE Midcap index, which dropped a little over 13 percent in the same period. Ironically, this correction is happening at a point in time where the underlying micro conditions are much favourable, Bhan told CNBC-TV18.

Commenting on the government’s move to hike the minimum support price, he said the move will help sectors like consumption or sectors related to rural consumption. “Hike in MSP will help support rural demand.”

However, he was quick to add that the other areas of consumption such as consumer staples and discretionary are much better placed. “Nearly 30-40 percent of India’s market capitalisation falls into this particular sector/area which makes the opportunity far more diversified. Consumption as a theme is secular although some pockets may be trading at expensive valuations, but if growth sustains in rural as well as urban side investors have nothing to worry.”